The Supervisor expects the banking system to use the capital surplus for the purpose of increasing credit and not for the purpose of distributing dividends at least until the end of the temporary order.
Although throughout the year it was apparent that banks had accumulated the worn-out capital pillows, in part by delaying dividend distribution policies, we are still in an environment of uncertainty as to the continuation of the health crisis and its associated economic consequences.
The banking system in Israel is strong, and banks enjoy capital surpluses and liquidity. Although the accelerated immunization process raises the expectation of a rapid return of the economy to growth, the risks inherent in the activity of the banking system remain high in light of the risk of further waves of illness and the uncertainty that may lead to economic damage.
The Supervisor believes that there is room to adopt a cautious and conservative approach, if some of the effects of the crisis have not yet been manifested and in light of the potential for the existence of hidden credit losses that have not yet materialized; This is in light of the temporary validity of government support and the outline of the freeze on loans to businesses and households.
The cautious approach is also required to meet the expectation that the banks will continue to assist the Israeli economy in the process of emerging from the crisis. In light of this, banks are even more required to plan conservatively and carefully.
For the first post on the subject published on 29/03/2020: https://bit.ly/38fbU2Q
In addition, the draft circular distributed today and attached to this announcement describes further extensions in various guidelines given to the banking system for dealing with the corona crisis and were due to end at the end of this month.
For messages and returns